Why Apple Spent $3 Billion on Beats

It's actually buying itself back.

Back when I was still trying to figure out how to turn my English degree into enough money to move out of my parent’s house, I applied for a part-time sales position at an Apple Store that was opening a few towns over. It was the first on Long Island and only the 32nd across the country, so my experience with them had been limited to the one or two grand-openings I had gone out of my way to attend. But it wasn’t the job I was attracted to, it was the culture.

Mind you, Apple was a far different company back then. In the spring of 2002, the iPod was still a fledgling piece of technology that everyone wanted to look at but few people bought. As the owner of one, it felt like I was a member of an exclusive club, and I proudly walked around with 1,000 songs in my pocket, having spent countless weekends ripping my entire CD collection into my iBook. This was before the iTunes Music Store, when digital music was still a thing record labels fought and my parents didn’t exactly understand, and walking around with an iPod felt rebellious, cool, audacious, a radical statement that I was on the front lines of the future.

Of course, I wasn’t alone. From the iconic Think Different campaign to the glowing logo on the back of its laptops, Apple wants its users to feel a certain way about its products. It’s not a trick or a gimmick; on the contrary, Apple has gone to great lengths to craft a culture around its brand, inspiring a devoted following willing to wait on line for days just to get their hands on its latest creation. It’s this fan base that sustained it through the lean years and cheered as it soared to the heights it enjoys today.

Few companies today are able to foster that kind of a connection with its users, but Beats is one of them. A perfectly timed power play by two of the industry’s all-time heavyweights, Jimmy Iovine and Dr. Dre, turned a dull niche product into a fashionable luxury item that oozes personality. Audiophiles can complain all they want about the price and the muddled, bass-heavy sound, but Beats isn’t selling a billion dollars worth of headphones based on their superior sound; much like Apple, Beats tapped into something intangible, an identity that transcends musical genres and smartphone platforms.

It might seem that Apple is grossly overpaying for Beats, and from a pure business standpoint, perhaps it is. But in a world where brand loyalty is tied to two-year carrier contracts and monthly subscriptions, Iovine and Dre have built a culture with a strong, youthful foundation willing to spend a little more for something that speaks to them. And with Apple’s boundless resources at their disposal, there’s no telling what they can accomplish.

In a way, you might say Apple is buying a little piece of itself back. It’s not so much that it’s lost its cachet or cool factor, but it’s hard to stay intimate with your customers when you’re selling hundreds of millions of products each year. iPhones and iPads are so popular and have inspired so many similar competitors that using one isn’t quite as uniquely special as it once was. But every kid with a pair of Beats headphones around their neck feels just like I did when walked around with my iPod all those years ago. If Apple were to open a Beats Store, you can bet there would be a line of teenagers and twentysomethings knocking down the door to get an application.